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Sterling Construction’s CEO Buys $500,000 Worth of Stock through Public Offering

The man in charge of Sterling Construction Company Inc. (NASDAQ:STRL) was caught buying a massive block of shares earlier this week. Chief Executive Officer Paul J. Varello bought 125,000 shares on Wednesday at a price of $4.00 per share, boosting his overall holding to 737,203 shares. Mr. Varello purchased the aforementioned block of shares through a public offering of 4.50 million shares, so this purchase does not necessarily suggest that the shares of Sterling Construction are undervalued. Instead, the purchase shows that the CEO is ready inject some of his own capital into the future growth of the company, which also represents a bullish indicator to some extent.

The company operates as a heavy civil construction company that focusses on building and reconstructing transportation and water infrastructure projects such as highways, roads, bridges, as well as water, wastewater and storm drainage systems. Sterling Construction plans to use the capital raised from the offering to cover working capital needs, repay indebtedness outstanding under the revolving loan portion of its equipment-based credit facility and cover general corporate expenses. The company had $27.27 million in long-term debt at the end of March, which bears interest at an initial fixed annual rate of 12%. Meanwhile, the indebtedness under the revolving loan portion of the credit facility totaled $13.10 million.

Sterling Construction’s core business heavily relies on Federal and state fund, so the company may benefit from the recent passage of the federally funded five-year $305 billion surface transportation bill that is set to increase the annual federal highway investment by 15.1% over the next five-year period. The stock is up 6% in the past 12 months despite having lost 28% year-to-date. Charles Paquelet’s Skylands Capital upped its stake in Sterling Construction Company Inc. (NASDAQ:STRL) by 8% during the March quarter to 96,082 shares.